Long ago, in the 1850s when cotton was king, those glorious labor-intensive days, Lehman Brothers established itself as brokers of that cotton. The American south was one of the richest places in the world, and Lehman made a fortune.
Lehman’s storied history became just that today: history, as one of Wall Street’s giants bit the dust — the greatest bankruptcy in the history of the United States — another casualty of the great credit crisis of 2008. Lehman’s got company: The biggest stock brokerage firm in the world, Merrill Lynch, dumped in a fire sale; AIG, the largest insurance company in the world, scrambling for cash.
The insurance that guarantees the commitments of these giant financial institutions – called Credit Default Swaps – now equals $62 trillion dollars. That approaches 5 times the annual gross domestic product of the United States. The cost to insure these obligations has doubled in six months, adding further pressure to an economy crippled by speculation, fraud, and gouging. The answer: nationalization of credit markets. Those words are echoing around the world today as capitalists are crying out for help in the form of government intervention and aid.
Ironically, government intervention is what was needed all along to keep adequate reserves up and speculation under control. Just ask Sarah Palin, who had this take today on the US financial debacle:
"Washington has been asleep at the switch. John McCain and I are going to put an end to the mismanagement and abuses in Washington and on Wall Street that have resulted in this financial crisis." Last I checked the GOP weren’t asleep at the switch, they were actively deregulating oversight.